Monday, April 28, 2014
Investing in Socal Networking Earnings Growth
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Shares of social media giant Facebook (FB - Trend Report) have been in focus over the last few weeks as worries over a hot stock bubble have dominated the market. In fact, during an especially rough stretch from mid-March to mid-April, FB tumbled by nearly 20%, putting extra pressure on the firm to give investors some good news at earnings season.
FB did not disappoint with its first quarter results though, as the firm easily beat the Zacks Consensus Estimate of 18 cents a share on Wednesday, posting EPS of 25 cents. Revenues were also impressive, as FB posted $2.51 billion in revenues, a 72.2% increase from the year ago quarter.
The really impressive part of the earnings report was Facebook’s continued surge in the increasingly-important mobile sphere. Mobile ad revenues were $1.3 billion, and were close to 60% of the total ad revenues, showcasing just how far FB has come in mobile in a very short time frame.
Clearly, Facebook has figured out mobile in a big way which is huge for their near term outlook as mobile monthly active users soared 34% year-over-year to just over one billion. And since Facebook already has users’ likes, dislikes, and preferences, there is hope that Facebook can be a key stop for mobile advertisers seeking targeted audiences.
Thanks to this, some investors are starting to feel a bit better about FB stock in the near term, especially as the price continues to tumble, making FB an intriguing choice at these levels and especially so considering its growth rate projections. In fact, current figures have FB earnings growth at over 67% year-over-year for this year, and nearly 41% for next year.
Estimates have also been trending higher as of late, as readings for the current year have grown from 88 cents a share 90 days ago to $1.01/share today. Meanwhile, for the next year time frame, estimates have moved from $1.22/share 90 days ago to their current level at $1.42/share.
These rising estimates, coupled with Facebook’s sheer dominance of mobile, suggest that bright days are still ahead for FB and that incredible growth is definitely possible over the long haul for this social giant.
Given this, it shouldn’t be too much of a surprise that Facebook currently has a Zacks Rank #1 (Strong Buy) and that we are looking for some outperformance from this company over the next few months. The stock remains a best in class pick in its industry too, and it is actually one of just three stocks in the internet services industry that clocks in with a Zacks Rank #1 at this time, suggesting it is probably one of your top bets in the rocky internet market right now.
Facebook has certainly dealt with a rough patch lately as its shares, much like the broader social media industry, have been in a bit of a downward spiral thanks to concerns over high growth names. However, FB continues to trounce estimates and impress with its mobile revenues, while it scoops up the competition leaving it well positioned for the future as well.
So investors who are willing to wade through some significant near term volatility might want to consider making a play on FB stock at these levels. Earnings estimates are moving in the right direction, and Facebook is clearly building a ‘wide moat’ business that looks to stave off competition for years to come, suggesting that there is plenty of earnings growth left for investors in this in-focus stock.
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